Canadian Retail Attracts American Shops

To anyone following financial news, it’s no big surprise that Canadian retailers are experiencing better sales than their American counterparts. Interestingly, this is even the case when an American retailer opens shop in Canada. As The Toronto Star’s business reporter, Dana Flavelle revealed yesterday, the opening of a new Victoria’s Secret in Toronto’s Yorkdale mall is proof of that.

Flavelle writes that mall traffic jumped by 40 per cent the day the new lingerie store opened up in Yorkdale. Mall manager, Anthony Casalanguida conceded that U.S. brands are very popular north of the border, creating a large demand when they open up shop up north. Sensibly, this encourages more American retailers to open more stores in Canada.

A report by Moody’s Investor Services found that Canadian retail sales have run approximately 3 to 4 per cent ahead of the American market in recent years. Flavelle writes that, as a result, such U.S. retailers as Target Corp., J. Crew and Marshalls will be joining Brooks Brothers and Crate & Barrel as companies opening up their Canadian operations.

The Moody’s report notes that American retailers have pretty much saturated their own market. The close proximity to Canada and the shared English language help for the country to be a natural starting point for global expansion. In addition, Canada’s recovery process from the recent recession is proving to be stronger than that of the United States.

The report also reveals that retail profit margins in Canada are strong as well. Flavelle writes, however, that the report also cautions that “there are potential headwinds, including rising consumer debt levels, a volatile Canadian dollar and increased competition.”

In his interview with The Toronto Star, Darren Kirk, the senior vice-president at Moody’s, had this to say: “This growth Canada has enjoyed hasn’t come without a price. The consumer debt burden is now much higher than it was going back a few years. At some point, it’s a factor that’s going to restrain growth in future.”

There are a few factors, on the other hand, that are contributing to strong retail sales in Canada. The rising Canadian dollar helps to keep import costs down, although it does inspire “cross-border comparison shopping”. The Moody’s report predicts that “consumers will continue trading down to cheaper products through 2011, a trend that began during the recession.”